Samsung Hit with $601 Million Demand in Back Taxes and Penalties on Discrepancies in Telecom Imports
The dispute centers on allegations that the South Korean electronics giant evaded import duties on key telecom equipment supplied to Reliance Jio
Samsung – Samsung back tax demand India – Samsung case updates – taxscan
Samsung – Samsung back tax demand India – Samsung case updates – taxscan
South Korean tech-mammoth Samsung has found itself on the wrong side of the tax authorities in India as they have been hit with a massive $601 million tax demand, marking one of the largest tax disputes involving a foreign company in recent years.
The matters precluding the tax dispute centers on allegations that the South Korean electronics giant had evaded the due payment import duties on key telecom equipment supplied to Reliance Jio. The case, which has been ongoing since 2021 has now culminated in a formal tax order issued by Indian customs authorities on January 8, 2025.
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The Allegations Against Samsung
According to Indian officials, Samsung misclassified its telecom imports to avoid paying tariffs ranging between 10% and 20% on the "Remote Radio Head" (RRH), a critical component used in mobile towers. From 2018 to 2021, the company reportedly imported RRH units worth $784 million from Korea and Vietnam without paying the required import duties.
The tax demand includes a direct liability of ₹44.6 billion ($520 million) in unpaid taxes and an additional 100% penalty, bringing the total to $601 million. This sum represents a significant chunk of Samsung’s $955 million net profit in India for the previous financial year.
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The investigation, led by Customs Commissioner Sonal Bajaj, accused Samsung of "knowingly and intentionally presenting false documents" before authorities to clear these imports without duty payments. Bajaj further stated that Samsung "transgressed all business ethics and industry practices" to maximize profits at the cost of the Indian exchequer.
In response to these allegations, Samsung has maintained that the issue revolves around a difference in the interpretation of customs classifications rather than deliberate evasion. The company, which has a strong presence in India's consumer electronics and telecom sector, has asserted its compliance with Indian laws while "assessing legal options" to challenge the tax order.
Additionally, Indian authorities have penalized seven senior executives from Samsung India, who now face personal fines totaling $81 million. Those named in the order include Sung Beam Hong, Vice President of the Network Division, Dong Won Chu, Chief Financial Officer (CFO), Sheetal Jain, General Manager of Finance, and Nikhil Aggarwal, General Manager for Indirect Taxes. The penalties against individual executives mark an aggressive stance on corporate tax compliance taken by the Indian tax authorities.
Samsung has strongly refuted claims of duty evasion, arguing that the Remote Radio Head component does not function as a transceiver and is therefore not subject to import duties. The company has submitted four expert opinions supporting its classification of the component. However, Indian customs officials cited letters from Samsung itself, dating back to 2020, in which the company allegedly described the RRH as a transceiver—a component that transmits signals and is subject to duty.
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This case comes amid India's increased scrutiny of foreign corporations and their tax practices. Samsung is not the only company under the scanner—other firms like Volkswagen, Hyundai, and Kia have also faced hefty tax demands in recent months. Volkswagen India is currently challenging a $1.4 billion tax order in the Bombay High Court over allegations of misclassifying imported car parts.
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As Samsung prepares for a prolonged legal battle, this tax controversy may not just impact its financials but could also shape the future of India's regulatory engagement with foreign giants, however, the end results of the measures are poised to be instrumental in shaping the broader regulatory landscape for foreign business entities operating in the country.
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